Talks dead in the water

The world trade talks in Cancun collapsed last night after the richer countries failed to meet the demands of poorer nations for drastic reform of agricultural subsidies without western strings.

Unless there is an unexpected volte-face, the Cancun talks are dead in the water. Lower-key talks will carry on in Geneva but without the urgency that a summit of 146 nations brings.

This is a tragedy but at least the developing world used its new-found bargaining strength to resist the drastic conditions that the US - and Europe in particular - tried to impose, rather than giving in to superior economic strength.

The political power of the developing world was strengthened during the meeting by the emergence of the G21 group of developing countries, including China, Brazil and India. This provided a much-needed counterweight to the massive bargaining power of the US and EU.

After the violent collapse of the talks in Seattle, western countries promised poorer nations that the new Doha round would put the interests of developing countries first. It has done nothing of the kind.

It has linked the abolition of subsidies to the opening up by third world countries of their markets to more western investment and exports. This is wrong. Subsidies are such a barrier to galvanising third world agriculture that they should be abandoned unconditionally.

There is no justification at all for spending billions to pay US farmers to overproduce cotton to be dumped on African countries, destroying one of the few industries they can do well.

Similarly there is no justification for Europe growing so much uneconomic sugar beet, when sugar could be more economically produced in Africa. If western nations abolished these subsidies it would justify itself - they would have over $300bn a year more to spend on other things. Rarely has virtue had such built-in reward.

America does not come out of this well, with her shoddy efforts to re-categorise subsidies rather than abolish them on the grounds that the 2001 farm bill would have to be rewritten. But since that bill contains an extra $180bn of subsidies over ten years that the incoming Bush administration never intended to happen, it is high time it was rewritten.

But if there is a real villain it is Europe which, according to aid groups, opposed the interests of developing countries from beginning to end. In doing this Pascal Lamy, the EU negotiator, may have merely been reflecting the obdurate views of uncompromising member countries like France and Ireland, but that is no excuse.

Europe is bigger than that and he has missed an opportunity for statesmanship that could have given a badly needed new image for the EU. Europe is just as bad as the US in endowing crops like sugar beet with absurd subsidies. Such products could, and should, be grown more in developing countries, providing a huge number of new jobs.

The economic argument has largely been won. Hardly anyone, even recipients, finds it easy to justify such huge subsidies when the consequences are spelled out. But no one voluntarily gives up freebies, which is why some countries that have benefited the most, like Ireland, are the most resistant to change.

Some lobbies will call for the abolition of the World Trade Organisation because of the failure to secure an agreement. That would be silly and wrong. The WTO is a more democratic organisation than the World Bank and International Monetary Fund. It proceeds by consensus rather than voting and poorer countries form the majority.

Developing nations are right to use the clout given by numerical superiority to break the intransigence of the US and EU. The WTO is not the problem. The behaviour of its richer members is. But it may be a long time before the failure at Cancun can be rectified.